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Francophone Africa Newsletter

Welcome to the first issue of our Newsletter which provides an overview of legal developments that may affect your business operations in French-Speaking Africa.

Our Francophone Africa practice is a key component of our Africa Initiative as further described in the attached brochure.

We hope you find the content of the Newsletter useful, and we welcome your feedback.

Guinea - Distribution of Dividends

Law No. 2016/075 of December 30, 2016 on the financial governance of public companies and institutions in the Republic of Guinea provided that all joint stock companies (sociétés anonymes) in which the State holds a majority participation (the so-call mixed-capital companies or sociétés mixtes) must obtain the prior approval of the Ministry of Finance to distribute their dividends.

The Secretary General of the Comesa, the Common Market for Eastern and Southern Africa, has just announced that Tunisia should officially join the Comesa at the summit to be held on April 18 and 19, 2018 in Burundi. However, accession to the Free Trade Agreement (FTA) concluded by 15 of the 19 Member States of the Comesa will not be automatic for Tunisia.

In order to become a full participant and benefit from the elimination of import duties and quotas under the FTA – and not simply from preferential tariffs when goods originating in Tunisia are sold in other Member States of the Comesa FTA – Tunisia will have to modify its legislation. Laws will also need to be amended to achieve the customs union and adopt the common external tariff or the free movement of people. Tunisia has not yet announced a timetable to bring its laws into conformity with Comesa's requirements. In the long run, if Tunisia were to become a full member of the Comesa FTA, it shall also benefit from the Tripartite Free Trade Agreement (TFTA) which brings together three economic regions which are working towards integration: Comesa, EAC (East African Community) and SADC (Southern African Development Community).

Algeria - Vehicule Assembly

Algeria continues to encourage the local production of vehicles through SKD/CKD assembly (exportation of semi or completely knock down vehicles for local assembly) while eliminating import quotas for dealers for the second consecutive year. After many cabinet reshuffles, Executive Decree No. 17-344setting forth the conditions and procedures for the activity of vehicle assembly and production and its specifications was published on November 28, 2017.

The Decree was meant to put an end to the uncertainty faced by foreign manufacturers and their Algerian partners which had been granted licenses at the discretion of the former Minister of Industry. However, several amendments to the Decree will be required due to numerous gaps and ambiguities in the text of the Executive Decree.

The list of operators claiming to invest in the automotive sector remains open to all investors. Indeed, the private Secretary of the Minister of Industry has recently indicated that the first list of 10 authorized operators, which had then been extended to 40 operators, would again be expanded to include all 83 projects currently under review. The official list of authorized manufacturers and their Algerian partners has yet to be released and will, in principle, concern all types of vehicles (tourism vehicles, cars, trucks, motorcycles, tanks and other machines).

In the meantime, letters have been issued to the investors to invite them submit their project to the National Agency for the Development of Investment (ANDI) in order to start the necessary formalities with the National investment Council (CNI).

Democratic Republic of Congo (DRC) - New Mining Code

The Congolese Parliament has recently adopted a new Mining Code. The text voted by the National Assembly and the Senate has to be promulgated by the President of the DRC to be effective.

This new text intends to subject existing mining conventions to the provisions of the new Mining Code. This measure raises many questions, in particular, the reconsideration of already in force conventions which include 10-year stability clauses. Indeed, the text provides for the removal of these clauses and intends to replace them with a 5-year stability clause.

In addition, the free-carried interest held by the State in the share capital of operating companies would be increased from 5 to 10%. Also, at least 10% of the share capital of these companies would now have to be allocated to Congolese citizens. We note that any transfer of shares in a mining company, including changes in the shareholding structure of a foreign holding company, would require the prior approval of the State.

The base and amount of mining fees should be reviewed. The mining fee would now be calculated on a gross basis (and no longer net), while all rates would be increased. The text also provides for the creation of a 10% levy on so-called strategic substances. The list of these substances will be established by a Prime Minister's decree and may include cobalt. Taxes applicable to mining operators should also be increased. Thus, a windfall profit tax of 50% would be applied to income earned when raw material prices rise by 25% above the levels set in the bankable-feasibility study.

Among the noteworthy changes introduced by the text, the latter intends to apply to mining operators the rules provided for by Law No. 17/001 of February 17, 2017 on subcontracting in the private sector, which prohibits, as of March 17, 2018, companies established in the country from subcontracting contracts, in all sectors of activity, to entities whose majority of the participation is not held by "Congolese capital". An exception is, however, provided in the event of a proven lack of expertise, for contracts not exceeding a period of six months. Beyond, the foreign subcontractor will be required to set up a company under Congolese law. Furthermore, sub-contracting of more than 40% of the contract value is prohibited. The application of this measure should, however, be difficult given the ambiguity of several of its provisions.

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